As sustainability disclosures become increasingly important, superannuation funds face the challenge of obtaining reliable emissions data for their investment portfolios. Traditional data sources often fill gaps in company-reported disclosures with estimated emissions. However, under Auditing Standard ASA 500, relying solely on estimated data can present audit challenges. Pathzero offers a complementary solution that enhances the reliability of emissions data, making disclosures assurance ready.
The audit challenge with estimated emissions data
Auditing Standard ASA 500 requires auditors to obtain sufficient appropriate audit evidence to form a basis for their opinion. This means that the evidence must be both reliable and relevant. When superannuation funds use emissions data that includes estimations or proxies, auditors may encounter difficulties:
Transparency concerns: Proprietary estimation methodologies may not be fully disclosed, making it challenging for auditors to assess the reliability of the data.
Assessment of reliability: Without clear insight into how emissions data is calculated, auditors may question whether it meets the sufficiency and appropriateness criteria under ASA 500.
Audit evidence sufficiency: Auditors need to understand the data sources and methodologies to determine if the evidence supports the financial disclosures.
Implications for superannuation funds
There are three key areas of concern for super funds with the above.
Audit risk, as dependence on estimated data without adequate transparency can increase the risk of audit qualifications; regulatory compliance as regulatory bodies move towards mandating sustainability disclosures, non-compliance could have significant consequences; and stakeholder confidence because reliable and auditable disclosures are crucial for maintaining trust among investors and beneficiaries.
Pathzero’s collaborative approach to reliable data
Pathzero enhances the existing data landscape by leveraging the financial investment network to source emissions data directly from external fund managers, and operating entities.
Direct data sourcing:
Transparency: Obtaining data straight from the entities responsible for the emissions ensures clarity in the data’s origin.
Reliability: Direct sourcing reduces reliance on estimations, improving data accuracy.
Alignment with ASA 500:
Sufficient appropriate evidence: Facilitates auditors in obtaining evidence that meets the standard’s stringent requirements.
Evaluable methodologies: Auditors can assess the data collection and calculation methods used by the source entities, enhancing audit efficiency.
Complementing existing data providers:
Integrated solutions: Pathzero’s approach can work alongside traditional data providers, offering a more comprehensive emissions data set.
Enhanced data quality: By combining estimated data with directly sourced information, superannuation funds can improve the overall quality of their disclosures.
Why private markets benefit significantly
Private markets often present transparency challenges due to limited public disclosures. Pathzero’s solution is particularly beneficial in this context
Engaging private entities encourages participation from private companies in sustainability reporting, while improved data completeness enhances the scope and depth of emissions data in private market investments.
Assurance-ready disclosures provide auditors with the necessary evidence to support their opinion, reducing audit risks.
Preparing for mandatory sustainability disclosures
With mandatory sustainability disclosures on the horizon, superannuation funds must ensure their reporting processes are robust and audit ready. Pathzero’s solution not only addresses current audit challenges but also positions funds for future regulatory compliance.
Conclusion
As the emphasis on sustainability reporting grows, superannuation funds need reliable, transparent, and auditable emissions data. Pathzero offers a complementary approach that aligns with Auditing Standard ASA 500 by sourcing data directly from the entities responsible for emissions. This method enhances the reliability of disclosures, supports audit requirements, and strengthens stakeholder confidence in sustainability commitments.
Enhance your fund’s sustainability disclosures with reliable, assurance-ready data. Contact Pathzero today to discover how we can support your emissions reporting needs in collaboration with existing data solutions.